Removal of Director Disqualification

All the day to day functions of the company are managed by Directors of the Company. All the decisions and responsibilities are on the shoulders of the Directors. The Company can’t run without them. Ministry of Corporate affairs has disqualified so many Directors in 2017 for the reason of not filing of Annual Return and Financial Statement of the Company to the concerned Registrar. Some of the Director was holding Directorship in other companies also. But due of this drive taken by Ministry these Directors were also disqualified from other Companies having active compliance status.

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In view of the same, the MCA introduced Condonation of Delay Scheme (CODS) vide a general Circular No. 16/2017 for providing relief to the Directors. In this scheme, the Directors can rescue from disqualification by filing Annual returns at Ministry.

But this scheme is for certain time limit. There are many Directors who wants to take the benefit of this scheme but couldn’t take and facing the same problem and now wants to resolve this issue because Directors has been restricted for being a part of any organization and participate in the day to day affairs of the Company. Disqualification of Director hamper the position of the Active company also because due to this company will lose its good and experienced person from the Company just because of other defaulted Companies which will prove to be the assets of the Company.

There is no way out in Companies Act, 2013 to remove the disqualification of Director. Here we will study step by step to remove the disqualification of the Director.

GROUNDS OF DISQUALIFICATION OF DIRECTORS

There are many grounds under Companies Act, 2013 due to which Director cannot be appointed as Director in the Company. 

  1. Unsound Mind;
  2. Undischarged Insolvent;
  3. Application for insolvent is pending;
  4. Convicted by court and sentenced to imprisonment for not less than six months and five years has not expired from the date of expiry of sentence;
  5. Order for disqualification passed by court or Tribunal;
  6. payment of calls due for more than six months;
  7. convicted of the offence dealing with Related Party Transactions during last preceding five years;
  8. Appointed without having DIN;
  9. Holding Directorship in more than 20 Companies at a same time;
  10. Financial Statement and Annual Return not filed for consecutive three financial years
  11. Failed to repay deposit, debentures or interest thereon or any dividend for one year or more.

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CONSEQUENCES OF DISQUALIFICATION

If the Directors of the Company fails to file Financial Statements and Annual Returns for continuous period of 3 Financial Years to the Registrar under Section 164(2) of the Companies Act, 2013 then he will be disqualified for 5 years. The following consequences of Disqualification are:

  1. Not eligible to appoint as Director in other Company;
  2. Not eligible to reappoint as Director in the existing Company;
  3. If the he is already a Director of any Company then he has to vacate their office from all the Companies other than the Company in which he has made default.

PROCEDURE FOR REMOVAL OF DISQUALIFICATION OF DIRECTOR

  • Drafting and filing of Writ Petition with High Court

First and foremost step is to draft and thereafter file the writ petition with concerned High Court for removal of Disqualification under Article 226 of the Constitution of India. In case of revival of the Company, the application needs to be filed to National Company Law Tribunal for restoration of the name of the company with effect of the same, Director can remove their disqualification.

  • Final Order of the High Court

The High Court shall provide its final order after hearing the petition and the relevant facts of the case for removal of the Disqualification of Director and restoration of the Director Identification Number (DIN) and in case of revival, the final order will be received from the National Company Law Tribunal for revival of the Company.

  • Submission of the Final order of the High Court to the ROC 

Thereafter, the final order of the High Court and National Company Law Tribunal will be submitted to the Registrar of the Companies for restoration of the name of the Company and DIN of the Director.

  • Filing of Statutory Documents 

As per the order of Hon’ble NCLT, Appellant is required to file pending Financial Statement and Annual Returns of the last Financial Years to the respective Registrar of the Companies in order to update the status of the company.

  • Activation of the DIN

Lastly the DIN of the director will be activated by the Registrar in their records and the Director become eligible for the appointment in any Company after removal of disqualification.

DOCUMENTS REQUIRED FOR FILING OF WRIT PETITION TO HIGH COURT

You have to file the writ petition with the help of professionals and following are the Documents required for filing of writ petition with the High Court.

 

  1. Memo of parties to the petition
  2. Reason and facts for disqualification or non compliance.
  3. Synopsis of list of date and events
  4. List of Companies in which applicant is the Director
  5. Evidence showing the Disqualification of the name of the Directors
  6. Any other document required to support the case.

HOW SMARTBIZGURU WILL HELP YOU:

Firstly, we will need to coordinate for required documents and then start the below mentioned steps.

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